Turtle Beach (NASDAQ: HEAR) — one of the market leaders of headsets and accessories for PC and game consoles. Production is located in the USA, Germany, Taiwan, Uk.
What do they earn
The company's products are sold in 40 countries by such retailers, how Amazon, Argos, Best Buy, Game, GameStop, EB Games, Media Markt, Saturn, Target and Walmart. The company includes three brands:
- Turtle Beach – production of headsets for consoles and PCs.
- Roccat – production of gaming accessories: mice, keyboards, headphones. Purchased from 2019.
- Neat Microphones – production of USB microphones. Acquired in January 2021.
Market size. According to the company, total market size of gaming headsets and accessories, featuring Turtle Beach, is $ 6.67 billion. Market growth for 2019 amounted to 7.9%, and for 2020 — more than 20%. Due to the pandemic, the year was very successful.. Headset market growth amounted to 20%, keyboards and mice — from 20 to 35%. Turtle Beach has 5.4% of the market, $0.36 billion.
Gaming headset market structure on 2020:
- headset — $3.2 billion;
- mice and keyboards - $2.5 billion;
- USB microphones - $0.7 billion.
Thanks to the acquisition of Roccat and Neat Microphones, the company's revenue has grown significantly and shows a positive trend.. In the reporting documentation, the company does not disclose the revenue structure by division. She has a small corporate debt of $5.6 million..
Dynamics of revenue and net profit, million dollars
| Revenue | Net profit | |
|---|---|---|
| 2016 | 174 | −87 |
| 2017 | 149 | −3,25 |
| 2018 | 287 | 39,19 |
| 2019 | 235 | 17,94 |
| 2020 | 360 | 38,75 |
Dynamics of advertising and marketing expenditures, million dollars
| 2018 | 32,8 |
| 2019 | 38,6 |
| 2020 | 46,7 |
32,8
Product Analysis and Competition
The company has a wide range of headsets and accessories at a price from 20 to 250 $ – from mass market products to professional eSports accessories.
According to the rating site rtings.com:
- in the section "Best Gaming Mice of 2021", the Roccat Kone Pro model is in seventh place in the list of 201 gaming mice;
- in the "Gaming headsets" section, consisting of more than 400 models, Turtle Beach headphones gather dust somewhere in the middle of the first hundred with a very modest score in many respects. And in the article "4 best Turtle Beach headsets", the ratings of even the top models do not exceed 7.6 points out of 10 possible;
- in the section "Best Gaming Keyboards", the Roccat Vulcan PRO model ranks 23rd out of 135 with a rating of 9.2 out of 10.
In online stores, the company's products are marked with a large number of ratings and comments, what says about their popularity. For every Turtle Beach product in the tops, we see 2-3 Razer products, HyperX, Logitech, Corsair – There's a lot of competition in the PC and console accessory market.
Perspectives
Over the past two years, the company has significantly expanded its product line through the acquisition of Neat Microphones and Roccat.. Quite possibly, that the company will continue to buy competitors for further expansion, but there are no guarantees and obvious prerequisites yet. The company takes only about 5% of the world market.
Increased advertising and marketing spending in direct proportion to revenue growth, which indicates the effective use of money and revenue growth in the future. In 2014, the company founded its esports team to promote its own brand.. She also signed advertising contracts with popular NBA athletes Immanuel Quickley and Grayson Allen..
According to the reporting data for 2020, the company invested $12.3 million in research and development, what is more investment in previous years. This is due to the expansion of PC accessory development capabilities and the release of the Stealth 600 and Stealth 700 Gen 2 wireless gaming headsets for Xbox and PlayStation 5.. The company also invested in expanding the capabilities of software and in R&D for new product categories., which will be launched in 2021.
Investment attractiveness
The company has a capitalization of $453 million with revenue of $350 million., share price - 28 $ is a cheap company. In the spring of 2020, the shares cost 4 $, capitalization was 64 million, and revenue - more than 250 million. This speaks not only of the undervaluation of the company at that time, but also about its unpopularity among traders. The average daily trading volume indicates the low liquidity of shares.
A huge number of worthy competitors will not allow the company to significantly increase its market share. This requires a huge financial investment and a lot of time., and no guarantee, that the company will cope with the task.
As the popularity of eSports and game consoles grows, the company's popularity and demand for its products will grow.. According to the company, the number of eSports fans in 2020 increased to 495 million people.
Dividends. The company does not pay dividends, therefore unattractive for many investment funds.
COVID-19. According to the company, restrictive measures, related to COVID-19, had a positive impact on the results. Significantly increased sales of game consoles and PCs, and with them - and sales of gaming headsets. Added to this is the seasonality of the business.: sales peak around the Christmas holidays, — and got an excellent reporting for 2020. But expect the same revenue in 2021 is not worth it..
What's the bottom line?
HEAR is not a growth company, and with all the positive aspects in such a competitive market, you should not count on a significant increase in revenue. New products, which will be produced by the company, do not guarantee, that they will be successful with users, and with a successful release, new models will replace the old ones, what, yet again, will not give an impetus to increase revenue.
At a share price of 28 $ the company is cheap, but it does not have powerful growth drivers. At the peak of sales, the share price reached 38 $, And, probably, these are the maximum values for the coming years. Given the possible scenario of sales in the IT market and everything, what does it have to do with it, HEAR's share price could drop to 10 $, and there are no guarantees, that it will return to today's values.
